We have become accustomed to the anti-IP initiatives of the Federal Anti-Monopoly Service (FAS) in Russia. It has often come into the limelight demanding the liberalisation of parallel imports. When, three years ago, the Constitutional Court explained the rules for forbidding or allowing parallel imports, FAS began to be concerned with its direct responsibilities curbing monopolistic efforts of companies.
The Nativa and Mamont disputes
In this case, Nativa, a Russian company, brought to the market its generic medicine Nilotinib-nativ. The original patent for Nilotinib is owned by Novartis AG. Novartis sued Nativa and in 2017 the court confirmed that Nativa’s Nilatinib-nativ infringed Novartis’s Patent No. 2348627 and forbade its sales.
Nativa then assigned the product to its dependent company Mamont-Pharm, which renewed sales of Nilotinib-nativ but changed its name to Nilotinib.
This time Novartis sued Mamont Pharm for infringement of the same Patent No. 2348627. The court examined the claims and refused to allow them (Case No. A40-201092/20-15-1452, judgment dated March 3 2021).
The court stated that Novartis’s arguments linking Mamont Pharm to Nativa and the link between Nilotitib-nativ and Nilotinib sold by Mamont Pharma were irrelevant because they were different and unrelated court cases. Reference to other court cases cannot be taken into account because they concerned different legal relations and were based on different circumstances. The former ban concerned Nilotinib-nativ, while Mamont Pharm was selling Nilotinib.
Novartis appealed the judgment to the court of appeal. At the hearing on May 24 2021, Novartis withdrew its claims. The court approved the withdrawal of claims and closed the case. It also stated that if the proceedings are terminated in this way no other claims on behalf of the same persons and in connection with the same claims will be allowed. The judgment was published on May 27 2021.
Unfair competition complaint
At this point, the most interesting part of the saga began. A short time after the judgment, Novartis Pharma, a Russian subsidiary of Novartis, filed a complaint against Mamont Pharma before the Antimonopoly Body accusing Mamont Pharma of unfair competition. Novartis Pharma invoked Article 14.5 of the Law on Protection of Competition. It demanded that Mamont Pharma stop production and sales of Nilotinib, in which the invention protected by Novartis’s Patent No. 2348627 is used.
The FAS noted that the Pharmacy Register includes registration of a medicinal preparation Nilotinib protected by Russian Patent No. 2348627 owned by Novartis (the complainant). Mamont Pharma (the respondent) put on the market a certain amount of Nilotinib. The registration certificate for that medicine had been earlier obtained by Nativa. FAS cited Article 4 of the Law on Circulation of Pharmaceuticals according to which there is an original medicine with a new active substance and a reproduced medicine that has the same qualitative and quantitative composition equivalent to the referenced medicine, which is bio-equivalent.
Clinical tests confirmed that Nilotinib and Nilotinib-nativ are bio-equivalents. The FAS recalled that the earlier court judgment of 2017 had found that patent No 2348627 belonging to Novartis had been used by Nativa in the medicine Nilotinib-nativ. The court ruled at that time that Nativa should not use Nilotinib-nativ until expiration of the Patent No. 2348627 in 2023.
Mamont Pharma argued that the ban concerned a different business entity (Nativa) and a different medicine (Nilotinib-nativ). Its registration certificate was also different. The FAS rejected that argument. The FAS had earlier sent an inquiry to the Health Ministry regarding the registration certificate. The Ministry stated that that the registration certificate confirmed registration of one medicinal preparation regardless of changes made in the documents on file. The changes were of purely administrative character and did not concern materials, production processes, specifications, etc.
Hence the FAS drew a conclusion to the effect that both medicines, Nilotinib-nativ and Nilotinib, are the same medicinal preparation. Therefore, the previously imposed ban on the use of Nilotinib-nativ was also valid for Nilotinib.
According to Article 4 of the Competition Law, unfair competition means any actions of business entities aimed at obtaining advantages during entrepreneurial activities. Article 14.5 forbids unfair competition involving unlawful use of the intellectual property of other persons.
Further, the FAS concluded that the complainant and the respondent are competitors on the market. It is not important that within the framework of this case the complainant and the patent owner are different companies. The respondent argued that it and Novartis (the patent owner) are not competitors (which is true – its competitor is Novartis Pharma, the Russian company). The FAS dismissed that argument stating that any person may complain against violation of the Antimonopoly Law. The complainant is the competitor so it has the right to raise this issue.
The FAS stated that the respondent was selling Nilotinib definitely knowing that it infringes Novartis’s rights in Patent No. 2348627.
The FAS concluded that the actions of the respondent contained all the characteristics of unfair competition: it sought to obtain advantage as a result of its activities. It violated provision 10.bis of the Paris Convention forbidding any act of competition contradicting honest practices. Those actions could cause damage to the patent owner and reduce its sales of the medicine.
In conclusion, the FAS considered the activities of Mamont Pharma to be unfair competition and issued a writ forbidding the production and sale of Nilotinib.
It is worth noting that FAS did not restrain itself by absolutely formal considerations stated by the court in March 2021. It applied common sense without stretching the law. Even though the involvement of the FAS in disputes concerning intellectual property seems somewhat unusual, we can only welcome its initiatives to protect IP rights.
Vladimir Biriulin
Partner, Gorodissky
